Orthopedic cases rely on successful payor contracts to be profitable, due to high implant costs that can quickly derail profitability from a good reimbursement rate. Rob Janeway, Industry Relations & Contracts Manager for MedBridge, discusses five tactics for ASC administrators and leaders to negotiate profitable payor contracts for orthopedic cases.

1. Understand your vendor costs before payor negotiation. Never go into a payor negotiation without a thorough understanding of your implant and supply costs, Mr. Janeway says. "If you know the implant cost will be expensive, you want to know that you're not going to worry about bringing the case on," he says. "You should know the costs for the cases you are doing, as well as the cases you could be doing but aren't because they require high-cost equipment and implants."

He says a good strategy for payor negotiations is to "ask for what you need, and know your historical case data." If a payor isn’t accommodating, you should always have data on your implant costs available at the negotiation. "It's always best to come equipped with information on your implant costs and volume," he says. “Your payor contracts should always ensure the costs of implants are covered.”

2. Collect data on cases that your physicians take to the hospital. You may be able to convince payors to give you a higher reimbursement rate if your physicians take ASC-eligible cases to the local hospital. According to a May 2012 report from Objective Health, the 2012 Medicare payment rate for shoulder arthroscopy was $1,201 for ASCs, which is 42 percent lower than the $2,085 price tag for the same procedure in hospitals.

Since payor rates often follow a percentage of Medicare, your payor will likely pay significantly more to send an orthopedic case to the hospital than to your ASC. Your payor may also need to be educated about the benefits of sending certain cases, such as total joint replacements, to surgery centers. Minimally invasive surgery has enabled ASCs to perform procedures that were previously untenable in an outpatient setting, so bring a physician to the negotiation to explain which cases are appropriate for your center. 3. Know which implants you perform most commonly, as well as your high-cost outliers. Look at historical data to determine your most commonly-used implants and your most expensive ones. "Sometimes you have a certain procedure that requires fixation, and you may only have ordered a device once in the last two or three years, but it costs $3,000," Mr. Janeway says. "You need to know about those outliers when walking into a negotiation." Be sure to look at your most common implant cases as well as your most expensive implants: High case volume can mean high costs over time, even if the individual implants cost less than your center's average.

4. Understand your payor's strategy for paying implants. "Each payor has a different strategy for paying implants, and you should know the strategy before negotiating reimbursement rates," Mr. Janeway says. Some payors don't give carve-outs and instead offer a bundled rate for the procedure, which makes it important to know your costs so that you don't go over budget on implants and supplies. Some payors will pay the implant based on the invoice, while others will only pay for implants when certain medical criteria are met. He says certain payors impose a minimum threshold in the contract. "Only if they cost above a certain dollar amount will they be reimbursed," Mr. Janeway says. "If they're telling you that you need to hit at least $500 in implants to be paid, you need to know how often your cases will involve implants with less than that dollar amount. Don’t be afraid to educate them."

Inversely, he says some payors place a cap on implant costs and will only pay up to a certain dollar limit. "If that's not meeting your center's needs because your implants are generally more expensive, you need to come to the table with that information," Mr. Janeway says. 5. Be careful with payors who use groupers for orthopedic rates. Some payors use fee schedules modeled on the old APC grouper rates, which frequently place orthopedic procedures in lower group numbers than appropriate. "It's very important know where your procedures fall into that fee schedule, especially if it's based off a grouper system" he says. If your orthopedic procedures are in a lower group than is profitable for your ASC, you need to know so that you can negotiate carve-outs for those procedures.